- Officials believe a self-regulatory environment will foster Hong Kong’s competitiveness.
- Failures of a self-regulatory framework have been reported in Lithuania.
Hong Kong city officials want crypto firms to operate in a self-regulatory manner, overseen by the Securities & Futures Commission (SFC). Officials drawn from the Hong Kong Securities & Futures Professionals Association (HKSFPA) recommended that crypto firms establish a self-regulatory committee and monitor one another for compliance.
HKSFPA says the Hong Kong financial market is “too focused on supervision,” yet there is no entity that safeguards the industry growth. The proposals state that the SFC will oversee market supervision while licensing will be left to the securities industry. An April 22 recommendation letter reads in part:
“In the case of Hong Kong, the Commission recommends that the Securities and Futures Commission still retains the power to supervise market conduct but splits the licensing power to solely the securities industry, A self-regulatory institution composed of the futures industry, asset management industry, and virtual asset industry.”
See Related: Hong Kong’s Regulator Receives The Initial Filing For The First Spot Bitcoin ETF
Acid Test to Make Hong Kong Competitive
The officials believe that letting the market self-regulate is needed to enable Hong Kong to remain competitive and retain its status as a global financial center.
The city has been a haven of crypto innovation and growth. On April 15, the regulator approved spot Bitcoin and Ether ETFs, following the decision by the US SEC for spot Bitcoin products in January. This comes as Hong Kong aims to compete with leading jurisdictions to become a haven for blockchain and financial innovations. The Hong Kong regulator has also granted licenses to virtual asset providers, including HashKey and OSL crypto exchanges.
The desire for a self-regulatory environment still faces an acid test based on the experiences elsewhere. Lithuania, which has been a haven of fin-tech in the past decade, is considering tightening the noose for multiple crypto companies. The decision emanates from claims of embezzlement and compliance failures despite the country granting licenses to over 580 crypto firms.
